||Product line extension is considered a low-cost, low-risk strategy of introducing products under the same category. Under product line extension strategy, however, manufactures and retailers usually advertise merely one product during a certain period, rather than advertising all products within the product line at the same time. Taking example of Coke Cola, it keeps extending its product line horizontally in the past years. There are Classic, Diet and Zero Coke belonging to the main product line. As we observed, Coke Cola seldom advertised for three products simultaneously. On the contrary, to highly impress consumers, only one product would be strongly promoted in a certain period. What is interesting is whether the advertisement of Zero Coke lowers the price that Classic Coke buyers are prepared to pay toward Classic Coke while zero calorie is highly emphasized in ads. It would be interesting to investigate the impact of product line advertisement on consumers to see whether the product line advertisement always brings positive influence on reference price toward consumers with different purchase purposes. |
This research addressed the question of how product-line advertisement influences consumer’s reference price within vertical and horizontal product line. It combined the research of product line extension and the concept of reference price to give advice for marketing. The category of product used in experiment is durable that was suggested in prior study. To examine the relationship between product-line advertisement and reference price, experimental method was performed here to test different kind of product line advertisement toward consumers with different purpose purposes, buying high-end product, low-end product or one certain product belonging to the horizontal product line. The results indicated that within the vertical product line, the brand advertisement with low-end product decreases the reference price toward high-end product buyers whereas the informational advertisement with low-end product increases the reference price toward high-end product buyers. Besides, within the horizontal product line, both of the brand and informational advertisement with one certain product in horizontal product line decreases the reference price toward the buyer who would like to buy another product belonging to the same product line.